As for the self-employed shopkeeper, do his business' profits not generally get passed through to him as income? Even though his business wouldn't pay, he would?

Define "profits". That's what we're saying.

"Profit" is income less expense, but in tax parlance, it's gross receipts less DEDUCTIONS.

The tax code defines the items you can deduct in various ways. You may be familiar with differences between "book accounting" and "tax accounting". How you define "profit" is not at all a clear cut, simple calculation for most businesses.